Please find attached our BNIS Fixed Income Daily Report of June 12, 2019.
Bond Market Review (Tue, 11/6)
Another upside movement took place on the Indonesia’s bond prices yesterday along with the positive sentiments from external and domestic. Most of the government yields tumbled by up to 21 bps along the curve, in which the 10-year government bond yield inched lower 1 bps to 7.70%. The IDR strengthened to IDR14,239/USD yesterday, compared to previous day’s closing level of IDR14,250 /USD.
Strengthening bond prices were still followed by the increasing investors’ activity in secondary market, in which the outright trading volume of Government securities reached IDR18.0 trillion yesterday, increasing from the previous day’s trading volume of IDR13.4 trillion, and also higher compared to the year-to-date average daily trading volume of IDR14.3 trillion. SR011 dan FR0078 were the two most actively-traded series in secondary market, with the trading volume of IDR3.6 trillion and IDR2.7 trillion, respectively. Meanwhile, the outright trading volume of corporate bonds was recorded at IDR1.3 trillion yesterday.
Bond Market Preview (Wed, 12/6)
Indonesia’s bond yields are expected to move in a narrow range amid mixed sentiments from external and domestic. From external, positive sentiment comes from the higher global investors’ expectation on the potential of Fed Fund Rate cut. The release of several US’s labor data which are slower than the previous period spurred higher expectation on the possibility of Fed rate cut this year. The probability of Fed rate cut in July 2019 rose to 76.2% last night, compared to last month’s level of only 16.0%. From domestic, higher investors’ activity will still provide a positive sentiment for the Indonesia’s bond market. This can be spotted from the average transaction since early this week which reached IDR15.7 trillion. Domestic market will also be supported by the stable IDR movement, and healthier foreign appetite. However, investors’ worries over the trade relationship between the US and China increased, after the US president, Donald Trump, said that he will hold up the trade agreement with China, unless China returns to terms negotiated earlier this year. This sentiment may curb the potential of further yield declining on domestic bond market. Investors also have to keep their eyes on the potential of profit taking in the market, after a significant strengthening in the previous days.
Along with the potential of narrow yield movements, then several Government bonds such as FR0077, FR0078, FR0053, FR0068, and FR0079 may become an attractive choice for investors.
Economics and Indonesia Bond Market News
PT Mora Telematika Indonesia plans to issue Shelf Registration Sukuk Ijara I Moratelindo Phase I 2019 with the volume up to IDR1.0 trillion. The Sukuk will be sold in two series i.e., the Series A paper has a tenor of 3 years, and the Series B paper has a tenor of 5 years. PEFINDO rating agency has also affirmed its idA(sy) rating for the Sukuk. As much as 85% of the fund proceeds from the Sukuk issuance will be used for the company’s infrastructure development, while the rest 15% will be used as working capital. The book building period will be held on June 12-19, 2019, the public offering period will be held on June 28 – July 1, 2019, while the electronic distribution and the registration in Indonesia Stock Exchange will be conducted on July 5 and July 8, 2019, respectively.
PEFINDO rating agency has affirmed its idA- ratings for PT Bank Victoria International Tbk (Bank Victoria) and its outstanding Shelf Registration Bond I 2017, and its idBBB+ ratings for the Bank’s outstanding Subordinated Bond II/2012 and Subordinated Bond III/2013. PEFINDO has also affirmed the rating of its Shelf Registration Subordinated Bond I 2017 at idBBB. At the same time, PEFINDO has assigned its idA- rating to its proposed Shelf Registration Bond II 2019 for a maximum of IDR200 billion and a idBBB rating to the proposed Shelf Registration Subordinated Bond II 2019 for a maximum of IDR800 billion. The outlook for the corporate rating is stable. PEFINDO also stated that the rating may be raised if Bank Victoria strengthens its business profile and improves its asset quality and profitability substantially and consistently. The rating may be lowered if the Bank’s asset quality and profitability figures considerably deteriorate.